1. What is CPI-based Inflation?

The Consumer Price Index (CPI) measures changes in the price level of a basket of consumer goods and services. Inflation calculated from CPI shows the percentage increase in prices over a specific period, typically year-over-year.

2. How the Inflation Calculator Works

The calculator uses the standard inflation formula:

Where:

• \( \text{CPI}_{\text{new}} \) — Current Consumer Price Index value
• \( \text{CPI}_{\text{old}} \) — Previous Consumer Price Index value

Explanation: The formula calculates the percentage change between two CPI values, showing how much prices have increased (positive) or decreased (negative).

3. Importance of Inflation Measurement

Details: CPI-based inflation is a key economic indicator used by policymakers, businesses, and consumers to understand purchasing power changes, adjust wages, and make financial decisions.

4. Using the Calculator

Tips: Enter both CPI values (current and previous) as index numbers (e.g., 255.657 for US CPI in 2019). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a "normal" inflation rate?
A: Most central banks target 2-3% annual inflation. Hyperinflation exceeds 50% monthly, while deflation is negative inflation.

Q2: How often is CPI calculated?
A: In most countries, CPI is calculated monthly by statistical agencies (e.g., BLS in the US, Eurostat in EU).

Q3: What's the difference between CPI and core CPI?
A: Core CPI excludes volatile food and energy prices to show underlying inflation trends.

Q4: Can inflation be negative?
A: Yes, negative inflation (deflation) occurs when CPI decreases over time.

Q5: Why use CPI instead of other inflation measures?
A: CPI focuses on consumer goods/services, while other indices (PPI, GDP deflator) measure different economic sectors.